Explores the process by which companies control and plan the costs of doing business.
Goals, Topics, and Objectives
- Costs Terms and Purposes
a. Define a cost object.
b. Distinguish between direct costs and indirect costs.
c. Explain variable costs and fixed costs.
d. Distinguish inventoriable costs from period costs. - Cost-Volume-Profit (CVP) Analysis
a. Discuss the features of cost-volume-profit analysis.
b. Compute the breakeven point and output level needed to achieve a target operating income.
c. Explain how managers use CVP analysis in decision making.
d. Use CVP analysis to plan variable and fixed costs. - Job Costing
a. Describe the building-block concepts of costing systems.
b. Compare and contrast job costing and process costing.
c. Track the flow of costs in a job-costing system.
d. Journalize the under- or over-allocated manufacturing overhead costs at the end of the fiscal year using alternative methods. - Process Costing
a. Identify the situations in which process costing systems are appropriate.
b. Discuss the concepts of process costing.
c. Compute average unit costs. - Activity-Based Costing and Activity-Based Management
a. Explain broad averaging of cost allocation.
b. Distinguish between simple and activity-based costing systems.
c. Allocate costs to products or services using activity-based costing.
d. Evaluate the costs and benefits of implementing activity-based costing systems.
e. Explain how activity-based costing systems are used in activity-based management. - Master Budgets and Responsibility Accounting
a. Describe the master budget, and explain its benefits.
b. Prepare the operating budget and its supporting schedules. - Flexible Budgets, Direct-Cost Variances, and Management Control
a. Explain static budgets and static budget variances.
b. Develop a flexible budget.
c. Calculate flexible budget variances and sales volume variances.
d. Explain standard costs.
e. Compute price variances and efficiency variances for direct cost categories.
f. Discuss how managers use variances.
g. Describe benchmarking, and explain its role in cost management. - Costing and Segment Reporting
a. Explain the difference between variable and absorption costing.
b. Compute product costs under variable and absorption costing methods.
c. Prepare segmented income statements that differentiate between traceable costs and company-wide costs. - Capital Budgeting
a. Distinguish relevant from irrelevant information in decision-making situations.
b. Explain the opportunity cost concept and why it is used in decision making. - Performance Measurement
Compute return on investment (ROI), and explain how factors affect ROI. Compute residual income, through-put time, delivery cycle time, and manufacturing cycle efficiency.
- Differential Analysis
Identify relevant and irrelevant costs. Prepare various analyses (drop or keep business segment, make or buy, accept or reject special order, sell at split-off or process further). Determine the most profitable use of a constrained resource.
Assessment and Requirements
Students will be assessed through tests, quizzes, assignments, and/or class participation.